Cisco revenue forecast disappoints; says to cut 1,100 more jobs

Reuters Staff

4 Min Read

(Reuters) - Cisco Systems Inc (CSCO.O) forecast current-quarter revenue that widely missed analysts’ estimates and said it would cut 1,100 more jobs, as the world’s largest networking gear maker steps up efforts to transform into a software-focused company.

FILE PHOTO: A newly installed phone made by Cisco is shown in San Diego, California, U.S., April 17, 2017. REUTERS/Mike Blake/File Photo

Shares of the Dow component fell 8.2 percent to $31.05 in after-market trading on Wednesday. The stock had closed down 1.4 percent in regular trading, compared with the 1.78 percent slump in the index .DJI.

Cisco, which announced in August that it would slash 5,500 jobs, said the new cuts would result in $150 million in additional pretax charges.

The company said on Wednesday it expected revenue for its fourth quarter to fall between 4-6 percent from a year earlier, implying a range of $11.88 billion-$12.13 billion.

Analysts on average had expected revenue of $12.51 billion, according to Thomson Reuters I/B/E/S.

Cisco said orders in its public sector business, which includes sales to federal, state and local governments, fell 4 percent in the third quarter ended April 29.

“It’s a pretty significant stall right now with the lack of budget visibility,” Chief Executive Chuck Robbins said on an earnings call.

Democrats and Republicans agreed earlier this month to provide around $1 trillion to keep the federal government funded through the end of the fiscal year on Sept. 30.

However, divisions between the parties are likely to flare up again when the White House unveils President Donald Trump’s first full budget for the 2018 fiscal year on Tuesday.

“Some of it is probably around the lack of a budget agreement on extending the debt limits until fairly late in the quarter, some of it could be related to timing of programs - it’s hard to pin that down.”

Demand for Cisco’s routers remained weak in the latest quarter, contributing to the company’s sixth straight decline in revenue.

The security business is set to benefit from a likely jump in spending by companies and governments following the recent global “ransomware” attack, according to some analysts.

Cisco, like other legacy technology players, is shifting its focus to high-growth areas such as security, the Internet of Things and cloud computing, amid intense competition from companies such as Huawei and Juniper Networks Inc (JNPR.N).

The company said it expected an adjusted profit of 60 cents-62 cents per share for the current quarter. Analysts on average were expecting a profit of 62 cents.

The company’s net income rose to $2.52 billion, or 50 cents per share, in the third quarter ended April 29 from $2.35 billion, or 46 cents per share, a year earlier.

Excluding items, the company earned 60 cents per share.

Revenue fell 0.5 percent to $11.94 billion.

Analysts on average had expected adjusted earnings of 58 cents per share and revenue of $11.89 billion.

Reporting by Anya George Tharakan in Bengaluru; Editing by Sriraj Kalluvila